The challenge

Defining blockchain and its risks and opportunities

Blockchain is a form of distributed ledger technology (DLT) that connects different parties over the internet to provide a secure and trustworthy record of their transactions (both financial and non-financial), without giving control to a third party.

On blockchains, you can prove where information has come from and gone to, which means it has the potential to open up new economic activity in areas such as financial services, regtech, supply chains and government registries.

Our response

Two reports: long term scenarios and immediate technical applications

Funded under the National Innovation and Science Agenda, we have delivered two reports that examine the risks and opportunities of blockchain technology in Australia.

The first report, Distributed Ledgers: Scenarios for the Australian economy over the coming decades, explores four plausible adoption scenarios of blockchain technology in Australian in 2030. This approach includes scenarios that are aspirational and transformative, establish a new equilibrium and represent collapse.

The second report, Risks and opportunities for systems using blockchain and smart contracts, selects three use cases to examine how blockchain systems can support new markets and business models. These include: agricultural supply chains, government registries and remittance payments.

We identified the following benefits for businesses and government.

Business

Since they remove the need for a third party, blockchains can reduce the number of stakeholders involved in a transaction therefore reducing cost and saving time. Blockchains can also enable better information sharing and better business processes, giving stakeholders more confidence and reducing cost and risk.

Government

Blockchain can be used as a common reference point to bring together different levels of government (local, state and federal) to host government registries of open data.

This may mean more reliable integration across government services, improved mobility and business consistency across states and better regulatory oversight when blockchains record operational information in regulated industries.

The results

More informed decision-making

[On a black background, a pale green hexagonal pattern wipes down the top of frame and out of the bottom of frame, as the logos for Data61 and the CSIRO appear above the text, "Creating our data driven future" with the website address "www.data61.com.au"

In an animation, on a pale green background, a cow wears a blue prize ribbon.

On a map, lines arc from locations in Australia to locations in New Zealand and throughout Asia.

VOICEOVER: Australia's high-quality beef is in high demand, particularly in Asia. However, food fraud, like counterfeit Aussie beef, costs the global food industry an estimated US$40 billion each year. This erodes the reputation of Australian brands.

[On a menu, "Premium Beef Steak" is marked with a blue prize ribbon.

In a restaurant, a couple eat steak.]

VOICEOVER: So how can consumers and businesses trust that their premium Aussie steak really comes from the paddock promised on the label?

[Long dotted lines run from skyscrapers into the air. Handshake symbols appear on some of the lines. The logos for Data61 and the CSIRO sit above the buildings.

Text: Blockchain Technology.

Oblong symbols are connected in a chain. Each symbol contains five coloured pentagons. Five pentagons move into the open oblong at the end of the chain. The oblong closes and a new empty, open oblong appears at the end of the chain.]

VOICEOVER: To solve this problem, CSIRO's Data61, Australia's leading data innovation group, is working to help industry adopt revolutionary Blockchain technology.

[Pictures appear in a series of six arrows representing a supply chain - a cow, a factory, transport, a warehouse, a shop, and a plate. Silos appear above the arrowsDotted lines move from the the arrows to silos. Some silos are not connected to some arrows.]

VOICEOVER: Agricultural supply chain transactions are typically recorded in isolated data silos, making it difficult and time-consuming to audit the origin of products and prevent imitations from sneaking in.

[The blockchain graphic replaces the silos. When a coloured pentagon appears above one arrow, then pentagons of the same colour soon appear above all the other arrows, and then inside the open blockchain oblong. Blockchains appear below the arrows as well. These blockchains are also coordinated with all the arrows.]

VOICEOVER: Blockchain technology, on the other hand, is not owned by any single party. Rather, it's operated by a collective. It provides neutral ground for all stakeholders in the supply chain to record their interactions on a distributed ledger.

[In the blockchain above the arrows, the dots are replaced by padlocks in every oblong. The blockchains below the arrows are replaced by blue prize ribbons and handshake symbols.

A magnifying circle highlights a blockchain's oblong. Ticks appear inside all the pentagons.]

VOICEOVER: Blockchain's transparency and inherent resistance to tampering creates a distributed network of trust and integrity. Which means anyone can check every step in the history of the goods throughout the supply chain.

[Circles containing food, then a cow a factory and a truck are surrounded by concentric rings of dotted lines.

A handshake symbol is labelled 'Trust'. A tick inside a decorated circle is labelled "Food Safety". A prize ribbon is labelled "Quality Brands".

A padlock inside a circle is labelled "Secure Trade". A dollar sign in a circle is labelled "Finance".]

VOICEOVER: When it comes to food, having reliable data that shows exactly where and how ingredients were grown, processed and distributed is essential to establish trust and food safety, as well as build high-quality brands, improve efficiency and secure trade. It also creates opportunities for new kinds of finance and insurance. To collaborate with Data61, visit data61.csiro.au/blockchain

[On a black screen, the logos for Data61 and the CSIRO appear above the text, "To collaborate with Data61, visit data61.csiro.au/blockchain."]

While we can't paint a full picture of all the opportunities for blockchain technology at present, a number of initial recommendations are evident. Blockchain is continually being explored globally by governments, enterprises and the start up ecosystem.

Our recommendations in the report include:

Increase research and development (R&D) on trustworthy blockchains

Test blockchains for 'rainy day scenarios'

Scrutinise technology-specific risks for new systems

Provide indicative guidance on sufficient evidence for regulatory acceptance of blockchain-based system

Inform regulators and businesses about the typical technical risks and limitations of blockchain technologies